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ABG looks to cut tax bill with strategic shift

ABG looks to cut tax bill with strategic shift
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First Published: Fri, Apr 27 2007. 12 09 AM IST
Updated: Fri, Apr 27 2007. 12 09 AM IST
Mumbai: India’s biggest private sector shipbuilder ABG Shipyard Ltd plans to merge its facility at Dahej in Gujarat with a neighbouring special economic zone (SEZ) to help save taxes and improve its competitiveness, a top company official said.
“We are trying to merge the upcoming Dahej yard with the Dahej SEZ Ltd. This will free us from paying a variety of taxes such as corporate tax, excise duty, sales tax, octroi, entry tax, fringe benefit tax, value-added tax and dividend distribution tax,” said Dhananjay Datar, chief financial officer of the Mumbai-based ABG.
Typically, these taxes account for about 24% of the cost of building a new ship. “An SEZ status would help us avoid the burden of paying these taxes,” he said. “It’s the biggest relief that we can hope to get.”
The Bombay Stock Exchange-listed firm is currently building its second yard over 40 hectares at Dahej with an investment of Rs950 crore.
The first phase, costing Rs400 crore, will be able to build eight ships simultaneously with a capacity of up to 1.2 lakh tonnes each and is targeted at the fast-growing dry bulk segment. It will also include two dry docks that can accomodate bulk carriers of up to 1.2 lakh tonnes and is scheduled to start operations in April 2008.
The second phase, costing Rs550 crore, will build jack-up rigs used in deep-water oil drilling operations and is expected to start operations in December 2008 with a capacity to build four rigs at a time.
Datar said ABG has approached the Gujarat Industrial Development Corp. (GIDC) to merge the upcoming yard with Dahej SEZ, promoted by GIDC and state-run oil prospecting company Oil and Natural Gas Corp. As the ownership of the waterfront of the yard vests with the Gujarat Maritime Board (GMB), the plan requires a no-objection certificate (NOC) from the state’s maritime regulator to go through. GIDC and GMB are currently discussing the issue.
“After getting the NOC from GMB, we will move an application to the Board of Approvals in charge of SEZ proposals in the Union commerce ministry to merge our Dahej yard with Dahej SEZ Ltd,” Datar said.
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First Published: Fri, Apr 27 2007. 12 09 AM IST
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